TMI Blog2019 (1) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenditure without any agreement with any of the parties and further some of the parties as noted by the Assessing Officer has not filed return of income. The fact that the amount was transferred at the fag end of the financial year in the accounts of these parties and immediately thereafter was withdrawn again shifting the burden on the assessee to prove the claim of expenditure. Therefore, to the extent of the expenditure on which the Assessing Officer has conducted enquiry, the assessee failed to disprove the enquiry conducted by the Assessing Officer. Since the Assessing Officer has not conducted any enquiry in respect of the remaining parties, therefore, we restrict the disallowance to the extent of the amount paid to the ten persons in respect to whom the Assessing Officer has conducted the enquiry. Accordingly the disallowance made by the Assessing Officer is restricted only to the ten persons and the remaining disallowances made by the Assessing Officer without conducting a proper enquiry is deleted. As clarified that once the assessee has filed the relevant documents in support of the claim and the Assessing Officer has conducted enquiry in respect of the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce the persons for examination. Since the assessee did not produce the persons to whom the commission was paid, the Assessing Officer issued summons U/s 131 of the Income Tax Act, 1961 (in short the Act) to ten persons. Since none of the persons appeared before the Assessing Officer and only three persons have responded to the notice issued by the Assessing Officer and accepted the receipt of commission from the assessee. However, the Assessing Officer examination of the bank details found that the commission paid by the assessee at the end of the financial year was immediately withdrawn or transferred from the said account to some other account and hence the Assessing Officer suspected that the amount claimed to have been paid as commission was actually siphoned on account of expenditure. The Assessing Officer further noted that the non-commission sales was ₹ 7,88,90,251/- and therefore, the assessee has offered the income in the returned income less than the commission amount if calculated on that sales made without commission. The Assessing Officer has accordingly disallowed the payment of commission. 3. The assessee challenged the action of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively for the business purposes and having consistent allowability in previous years, the disallowance made for the year under consideration for the entire expenditure is illegal, unjustified and liable to be quashed. The books of account of the assessee were subjected to audit and no defect was found by the Assessing Officer. Further the decline in GP and NP rate has been duly explained by the assessee then the disallowance made by the Assessing Officer of the entire commission payment is not justified. 5. On the other hand, the ld DR has submitted that the Assessing Officer has asked the assessee to produce eight parties for examination and verification of the claim of the assessee, however, the assessee failed to produce any of the parties before the Assessing Officer for examination. The Assessing Officer then issued summons U/s 131 of the Act to ten persons but none has appeared before the Assessing Officer. Even the record furnished by these parties were examined by the Assessing Officer and it was found that these persons have not paid any tax on the income and some of the persons have even not filed return of income. Further the Assessing Officer noted that the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in para 5.1 to 5.7 as under: 5.1 First and foremost, the background of the making disallowance needs to be appreciated. The AO has been requesting the appellant since Nov. 2016 to produce 8 parties to whom commission payments is claimed by the appellant. The appellant was impressed upon the importance of intended verification of commission expenses by the AO in the month of Dec. 2016 Jan. 2017. In spite of such emphasis by the AO in the month of Dec. 2016 Jan. 2017, when the appellant did not produced single witness, the AO issued summons u/s 131 to 10 witnesses including 3 from the list of 8 persons requested to be produced by the appellant. It is a fact on record, none of these 15 persons have appeared before the AO for necessary verification and inquiry by the AO. The replies by 3 parties were by the DAK as narrated by the AO on page 3 4 of the assessment order were raising eyebrows of the AO instead of satisfying the AO. Therefore, the AO was under compulsion to form adverse view and made the disallowance. 5.2 The above background is totally new to the assessment of this A.Y. which was not there while making the assessment as well as while deciding the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is below this figure. It means that the assessee has paid commission out of its pocket and not out of profits. Which is not possible in any business? c. During the year under consideration gross profit rate and net profit rate has been declined for which assessee failed to submit any justification. g. It was seen that for sale of some of the goods to a particular builder commission is shown to have been paid and for other sales to same builder no commission has been paid. 5.6 The replies received from three parties to whom commission is claimed to have been paid by the appellant, the following excerpted finding of the AO as mentioned in Para 4.5 on page 3 4 of the assessment order does not inspire to treat whole of commission expenses as genuine:- 1. Shri Ashok Kumar Baid:- He had submitted that he received commission of ₹ 3,31,470/- from M/s Shree Govind Buildneed Pvt. Ltd. He had not mentioned the details of sales on which he received commission. He had not attended despite specifically written in the summon. On examination of Bank account it was found that on 02.01.2013 ₹ 2,98,323/- was deposited in his bank account and on 04.01.2013 ₹ 3,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increasing commission expenses. This is required of appellant when this issue is getting attention of the department since last three / four years. Therefore, the decision of the AO to not consider such unverifiable expenses is confirmed. In my considered view, the commission expenses claimed of ₹ 97,58,305/- is non-genuine and hence the same is confirmed. Thus, we note that as far as enquiry conducted by the Assessing Officer in respect of the persons who whom summons were issued it was brought on record that the assessee has claimed the expenditure without any agreement with any of the parties and further some of the parties as noted by the Assessing Officer has not filed return of income. The fact that the amount was transferred at the fag end of the financial year in the accounts of these parties and immediately thereafter was withdrawn again shifting the burden on the assessee to prove the claim of expenditure. Therefore, to the extent of the expenditure on which the Assessing Officer has conducted enquiry, the assessee failed to disprove the enquiry conducted by the Assessing Officer. Since the Assessing Officer has not conducted any enquiry in respect of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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